Question ID: 1254
Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)
Article: 116
Status: Final
Date of submission: 12 Mar 2018
Question
We are referring to the formula V_prem,s=max(P_s; P_last,s)+FP_existing,s+FP_future,s and would like to clarify the recognition of an additional reinsurance treaty for the next 12 months:
Example:
P_last,s = 100
P_s = 110
Result of max(P_s; P_last,s) = 110
New Quota 50 % for the next 12 month (01.01. -31.12.) for derisking based on a decision of AMSB
Our Question:
Does the quota share lead to
a) Result of max(P_s; P_last,s) = 100
or can Article 116/4 be applied, meaning that the volume measure for premium risk can be derived based on the following formula
b) V_prem,s = P_s + FP_existing,s + FP_future,s = 55 + FP_existing,s + FP_future,s
In other words: Does the quota share reduce the volume measure as by article 116/4?
EIOPA answer
The answer does not cover the question of what impact could a change in the reinsurance programme have on the values FP(existing,s) and FP(future,s).
The answer is based on the following assumptions:
1. The reinsurance contract mentioned in the question meets the requirements in Articles 209, 210, 211 and 213 of Commission Delegated Regulation (EU) 2015/35.
2. The requirements in Article 116(4) Commission Delegated Regulation (EU) 2015/35 are met
3. The estimate Ps=55 of the premiums to be earned by the insurance or reinsurance undertaking in the segment s during the following 12 months is determined in accordance with Article 116(5)
In this case, V(prem,s) can be indeed determined as 55+FP(existing,s)+FP(future,s) in accordance with Article 116(4).